China Stocks rebound on bargain hunting

Headline indices of the Mainland China equity market advanced on Wednesday, 18 July 2018, as investors chased for heavily battered stocks on calming worries over economic growth after the country's top economic planning agency the National Development and Reform Commission (NDRC) said China likely to achieve official GDP growth target of 6.5% this year despite views that it faces a bumpy second half as a trade row with the United States intensifies. Around afternoon trade, the benchmark Shanghai Composite Index rose 0.51%, or 14.21 points, to 2,812.34, meanwhile the Shenzhen Composite Index, which tracks stocks on China's second exchange, grew 0.22% or 3.53 points, to 1,603.61. The blue-chip CSI300 index added 0.5%, or 17.20 points, to 3,466.58.

Chinese mainland stocks were down as much as 30% since their peak in January amid trade tensions. On July 6, U.S. President Donald Trump's administration officially instituted 25% duties on $34 billion worth of Chinese goods. China, for its part, swiftly responded by implementing retaliatory tariffs on the U.S. shortly afterward. The following week, the U.S. released a list of Chinese goods with an annual trade value of about $200 billion that may be subjected to 10% tariffs.

INDUSTRY NEWS: Home prices accelerate to near two-year high - New home prices in China accelerated to their fastest pace in almost two years in June, with buyer demand in bigger cities resilient in the face of fresh curbs against speculation, a sign more restrictions may be needed. Average new home prices in China's 70 major cities rose 1% in June from a month earlier, higher than the previous month's reading of 0.7%. The majority of the 70 cities surveyed by the National Bureau of Statistics (NBS) still reported a monthly price increase for new homes. Sixty-three cities reported higher prices in June, up from 61 in May. Compared with a year ago, new home prices rose 5%, quickening from May's 4.7-percent gain, according to data issued by the NBS. China's 31 tier-two cities which comprise sizeable provincial capitals led the rally, with prices up 1.2% in June from a month ago, the bureau said in a statement accompanying the data.

More sugar imports to undertake extra tariffs -- the Commerce Ministry said on Monday that China will levy extra tariffs on out-of-quota sugar imports from all origins starting from Aug. 1. China allows 1.94 million tons of sugar imports a year at a tariff of 15% as part of its commitments to the World Trade Organization. Shipments outside of that allowance out-of-quota imports are charged a higher tariff and need special permits. Pressured by a large global surplus and rising domestic production, Chinese sugar prices have plunged this year, pushing most producers into the red and threatening China's efforts to support millions of small farmers in the southern region of Guangxi and neighboring Yunnan Province.

CURRENCY NEWS: The Chinese yuan was down against the dollar on Wednesday, due to the People's Bank of China softer mid-point rate fixing. The central parity rate of the Chinese currency renminbi, or the yuan, weakened 93 basis points to 6.6914 against the U.S. dollar Wednesday, according to the China Foreign Exchange Trade System. In China's spot foreign exchange market, the yuan is allowed to rise or fall by 2% from the central parity rate each trading day.

OFFSHORE MARKET NEWS: US stock market closed higher on Tuesday, after Fed chair Jerome Powell reiterated his quiet optimism for the US economy. In testimony to the US Senate Banking Committee, Mr Powell said the outlook was bright and that Fed policymakers believe that "with appropriate monetary policy, the job market will remain strong and inflation will stay near 2% over the next several years". Investors focused on company earnings, which aside from Netflix were mostly good. The S&P 500 index rose 11.12 points, or 0.4%, to 2,809.55. The Dow Jones Industrial Average gained 55.53 points, or 0.2%, to 25,119.89. The Nasdaq composite jumped 49.40 points, or 0.6%, to 7,855.12.

The major European markets also ended higher on Tuesday. The STOXX600 index lifted up 0.2%. The German export-focused DAX index gained 0.8%. The UK FTSE index rose by 0.3%.

COMMODITY NEWS: Crude oil price was little changed on Tuesday after a period of volatility. Benchmark U.S. crude erased an early loss and finished little changed at $68.08 a barrel in New York. Brent crude, used to price international oils, picked up 0.4% to $72.16 a barrel in London.

Base metal prices mostly declined on the London Metal Exchange on Tuesday due to US dollar strength. Aluminium was the worst performer (-1.9%), but zinc rebounded by 1.3%. Gold dripped 1% to $1,227.30 an ounce. Silver sank 1.2% to $15.62 an ounce.

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